Public retirement poses unfunded liability

I am tremendously humored by the article on page 3 of your May 19 edition, entitled "County approves final budgets." Of course there is no disclaimer in your article that identified the fact that there was a $67 million negative charge to the balance sheet which was hardly noticed in the financials of the Douglas County. This increase in liability has been dismissed as,"no big deal" as it is a "long-term liability." In private business, should one misrepresent a long term liability to a bank or to shareholders, one would have hell to pay. The classic example is Bernie Madoff, who is currently serving 140 years in Federal Prison. While Government Accounting rules have allowed for the unfunded pension liabilities to be not included in the balance sheet and the changing rules required that this previously unreported liability be incorporated in the balance sheet, the act of reporting a "Balance Budget" is actual fiction and should be regarded as blatant Fraud and be criminally prosecuted.

I would like to make three points: 1) This is not caused by the county commissioners, the county manager or voters, it is a systemic flaw in the system that must be corrected; 2) The underlying cause of the problem is the origin of corruption in the government; and 3) We all came from somewhere (or our ancestors) to escape societies that had the "High Hats" and the serfs, slaves or worker bees with no rights, we didn't come here to suffer a renewal of this level of abuse.

Embedded in the current system is a government negotiation with union and non-union personnel for compensation that includes a defined benefit pension. As an example, the contract negotiations are between party A (the government agency) and party B (the Union or personnel representative), these parties "negotiate in good faith" and establish a defined benefit plan for the party B folks. The caveat is that if the pension fund does not get the required return on investment to properly fund the "defined benefit" in retirement, a third party (the Taxpayers) get whacked. The third party does not have a seat at the table.

Contract law is defined in the Constitution of the United States, and making a third (unrelated) party a guarantor is specifically prohibited. If the third party was not obligated and the pension fund was unable to meet the obligations it would be party B that would take the haircut. As I understand it this unfunded liability issue is costing the various units of government in the state of Nevada about $600,000,000/year. If the liability was retained by the pension fund, perhaps the beneficiaries would be more inclined to watch the investment portfolio and give more credence to the concept of economic growth.

The fact that the unfunded liabilities are laid-off to the future taxpayers is the source of government corruption. The beneficiaries of the "defined benefit" are severely motivated for this benefit and huge amounts of money are used by the groups of the beneficiaries to promote politicians that will serve to maximize their collective need. The structure of the benefits derived from these plans include the "retirement" benefit tied to the last few year of service. The most egregious example of this abuse, that I am aware of, was a member of the board of the Vallecitos water district, in Southern California. He served on the board for 18 years with a compensation of $6,000 a year. The last two years of service was as the No. 2 guy in an engineering position at a compensation rate of $124,000 a year. His pension: $108,000 a year. The Water district scalped the rate payers. In a 2-percent world that annuity was worth about $4 million. In the mean time, we private workers are required, by force of arms, to pay Social Security taxes that represent about 13 percent of our earning power. I took the liberty of having an accountant analyze what the value of that money would be, should it have been invested in a balanced portfolio that included real estate, bonds and stocks that was rebalance annually (I started paying in 1969). Four years ago the portfolio would have been worth $3.2 million and by the time I am eligible for full retirement it would be worth on the order of $4.5 million. Assuming a 5 percent return on investment, the hypothetical investment portfolio would yield $225,000 a year and when I die my heirs would have a nice little chunk of change. Instead, if I start receiving benefits from Social Security at age 66 my benefits are $2,697/month ($32,364/year) with a death benefit of $255.

So, we working folks in private business are getting shafted on both ends. The effective rates of return for Social Security (the fiduciary duty to the people by the congress of the United States that is and has been and will continue to be violated) are actually negative and yet we are being obligated by government bureaucrats who are negotiating future obligations on the taxpayer, while alleging balanced budgets. Who to they actually work for? Certainly not us. It really doesn't matter where we (or our ancestors) came from, in the evolution of human society all over the world, the starting with the concept of "lords, barons and the divine rights of kings". The aristocracy had one set of rules and the rest of use were cannon fodder.

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To correct the situation we could cap the retirement benefit of these government workers to the max benefit of the Social Security Administration say a $2,697/month. Or we can litigate in a class action with the Caption: People of the State of Nevada v Government Employees of the State of Nevada. It would need to be a Federal Action as all of the District Attorneys and Judges in Nevada as government employees, and are beneficiaries of the "Defined Benefit".

Finally, We the People, are trying to be free. The inherent corruption of government and the formation of two-class society, those with government pensions and those without is creating dissension in the ranks of the people. Let us remember the quote from Thomas Jefferson: "The government that governs least, governs best."